Report for the first quarter of 2001

Tue, Apr 24, 2001 11:56 CET

Report for the first quarter of 2001
·Profit after financial items was largely unchanged and amounted
to SEK 465 (478) million
·Processing costs fell compared with the preceding quarter but
costs for iron ore and coal are increasing significantly
·Cash flow in the business operations improved by just over SEK
200 million to approximately SEK 100 million
Consolidated profit and loss account (unaudited)
2000 2001 2000 April
'00-
SEK millions Quarter QuarterFull March
1 1 year '01
Sales 4,774 5,281 19,271 19,778
Cost of goods sold -3,823 -4,341 - -
16,100 16,618
Gross profit 951 940 3,171 3,160
Selling and administrative -446 -471 -1,830 -1,855
expenses
Other operating revenues and -19 12 601 632
expenses
Affiliated companies 10 10 20 20
Operating profit 496 491 1,962 1,957
Financial items -18 -26 -92 -100
Profit after financial items 478 465 1,870 1,857
Tax -136 -139 -517 -520
Minority shares -8 -6 -42 -40
Profit after tax 334 320 1,311 1,297
Return on capital employed - - 15 15
before tax (%)
Return on equity after tax - - 14 14
(%)
Earnings per share (SEK) 3.00 3.20 12.00 12.10
Equity per share (SEK) 89.70 98.40 94.80 98.40
Equity ratio (%) 58 52 50 52
Number of shares at end of 112.11 100.90 102.54 100.90
the period (millions)
Average number of shares 112.11 101.57 108.84 107.38
(millions)
The Market
Steel consumption in Western Europe peaked at the end of last year and
prices for sheet came under pressure at this time. Orders for sheet also
declined significantly towards the end of the preceding year but have
recovered during the first quarter. However, they were still somewhat
lower than during the first quarter of last year.
Prices for sheet in local currencies declined on average by 5% during
the first quarter compared with the preceding quarter. However, as a
result of a weaker Swedish krona, the effect in Swedish krona was
limited to 3%. However, it was possible to continue to carry out price
increases for both ordinary plate and quenched steels.
In total, the Group's steel prices in Swedish krona were 1% lower than
during the fourth quarter of last year. However, as a consequence of the
price increases of last year, prices in Swedish krona were still 10%
higher than during the first quarter of last year.
Production and deliveries
Production in the hot rolling strip mill in Borlänge has been curtailed
at times for market reasons but otherwise has been stable, as is the
case with production in the four-high rolling mill in Oxelösund. During
the quarter, sheet production amounted to 823 thousand tonnes, which was
1% higher than during the first quarter of last year and almost 7%
higher than during the preceding quarter.
Crude steel production amounted to 989 thousand tonnes, which was 5%
higher than during the corresponding quarter of last year but 2% lower
than during the final quarter of last year.
As a consequence of a weaker order book, especially towards the end of
last year sheet volumes were 6% lower than during the first quarter of
last year, while plate volumes were 2% higher. In total, deliveries from
the steel operations amounted to 747 thousand tonnes, which was 4% less
than during the corresponding quarter of last year.
Orders for high-strength sheet were also somewhat weaker, among other
things from the automotive and telecommunications industries, which
meant that deliveries were 5% lower than during the first quarter of
last year. Deliveries of extra and ultra high-strength sheet were,
however, at the same level as during the corresponding period of last
year.
Deliveries of quenched steels are still limited by access to quenching
capacity and thus were 5% lower than last year when a higher rate of
delivery could be maintained by reducing existing inventories.
Deliveries in the trading operations dependent on the Swedish market
fell somewhat compared with the autumn of last year but were
nevertheless 3% higher than during the first quarter of last year.
Sales and profit
Sales increased by 11% to SEK 5,281 (4,774) million. The increase was
due to higher prices. Sales were largely unchanged compared with the
final quarter of last year.
Prices for iron ore and coal are quoted in US dollars. Agreements for
coal have been concluded and resulted in price increases in dollars of
13%. The agreements enter into effect on 1 April but, due to existing
inventories, the full impact on profit will not be felt before the end
of the second quarter. Iron ore agreements have not yet been concluded,
but price trends on the world market indicate a price increase in
dollars of approximately 3%. The ore agreements will be executed with
effect commencing 1 January, and consequently they will have an
immediate impact on profits. With the current dollar rate, this should
result in cost increases in the Agreements for coal and ore of
approximately 30% and 18% respectively.
Processing costs fell by 7% compared with the preceding quarter but were
3% higher than during the first quarter of last year.
Operating profit was largely unchanged compared with the preceding
quarter and also the first quarter of last year. Compared with the first
quarter of last year, improved margins in the steel operations and
higher volumes in the trading and processing operations improved
operating profit, while lower volumes in the steel operations and weaker
margins in the trading and processing operations together with increased
processing costs and depreciation had a negative effect on profit.
Change in operating profit between
the first quarter of 2001 and the
first quarter of 2000 (SEK millions)
Steel operations
- Improved margins +140
- Lower volumes -25
Trading and processing
operations
- Weaker margins -55
- Increased volumes +55
Increased processing costs -45
Increased depreciation -14
Other -61
Change in operating profit -5
Financial items amounted to SEK -26 (-18) million. Profit after
financial items thus amounted to SEK 465 (478) million. Earnings per
share increased to 3.20 (3.00) SEK.
Capital expenditures
During the first quarter, decisions were taken regarding new capital
expenditures totalling SEK 312 (261) million. Of this amount, SEK 175
million relates to a decision to invest in new capacity for the
formatting of high-strength sheet in Borlänge. The new cutting lines
will be brought into operation during the summer of next year.
In 1999, a decision was taken to invest in a second quenching line in
Oxelösund. The quenching line will provide the possibility to expand the
product range within quenched steels and will increase quenching
capacity by approx. 50%. The investment amounts to SEK 550 million and
the quenching line will be brought into operation after the summer break
this year.
Last year, a decision was taken regarding a significant environmental
investment at the coking plant in Luleå at which a cover will be
installed in order to collect particulates from the coking process. In
addition, a decision was taken regarding a fifth press-hardening line at
SSAB HardTech's plant in Luleå and a third press-hardening line at the
plant in the United States. It is estimated that these three major
investments, totalling SEK 250 million, will be brought into operation
around the end of the current year.
Capital expenditures fell to SEK 217 (317) million.
Financing and liquidity
Since the beginning of the year, accounts receivable have increased
seasonally while the value of inventories was largely unchanged. Cash
flow from business operations amounted to nearly SEK 100 million. A
lower seasonal increase in operating capital and reduced capital
expenditures resulted in the cash flow in the business operations
improving by SEK 200 million compared with last year. However, as a
consequence of the payment of tax on the SPP funds received last year,
in total cash flow was negative at SEK -36 million.
The negative cash flow and continued repurchase of shares resulted in an
increase of SEK 185 million in net debts to SEK 3,270 million. Liquid
assets at the end of the quarter amounted to SEK 558 (822) million, of
which SEK 140 (127) million were in the parent company.
There is a Medium Term Note programme for long-term borrowing while
short-term borrowing primarily takes place within a commercial paper
programme. Borrowing possibilities within each of these programmes
amounts to SEK 2,000 million. At the end of March, borrowing within the
programmes amounted to SEK 3,555 million.
Repurchase of own shares - reduction in share capital
During the first quarter, 1.6 million shares (0.8 million class A shares
and 0.8 million class B shares) were purchased for SEK 150 million.
Thus, since May 2000 a total of 11.2 million shares, equivalent to 10%
of the total number of outstanding shares, have been purchased for SEK
974 million. The Board has thereby exercised its entire mandate to
repurchase shares and currently proposes to the Annual General Meeting
that the share capital be reduced by SEK 280 million through the
cancellation of the repurchased shares without repayment.
Prospects for the remainder of the year
Steel consumption in Western Europe is expected to decline from the top
level reached last year. Prices for sheet continue to be under pressure
and it has been necessary to accept certain additional price reductions
in the agreements that have been renegotiated pending the second
quarter. However, it has been possible to carry out certain price
increases with respect to both ordinary plate and quenched steels.
The new coal agreements will result in a significant increase in costs
commencing at the end of the second quarter. In combination with price
trends, it is thus estimated that gross profit margins in the steel
operations during the remainder of the year will be lower than during
the first quarter.
It is estimated that it will be possible to achieve some increase in
volumes in the sheet operations during the remainder of the year and,
with the start-up of the new quenching line after the holidays, it will
be possible to increase quenched steel volumes. However, it is believed
that volumes in the trading operations dependent on the Swedish market
will decline somewhat during the next quarter.
Change during Effect on Effect on
the rest of profit, earnings per
the year, % SEK millions share, SEK*
Prices - steel 10 800 5.70
operations
Volumes - steel 5 150 1.05
operations
Volumes - trading 10 90 0.65
operations
Margin - trading 2%-pts 100 0.70
operations
SEK index 5 145 1.05
The sensitivity analysis describes the manner in which changes in the
stated factors during the remainder of the year compared with the first
quarter will affect this year's profit before tax and earnings per
share.
*) The effect has been calculated on the basis of the number of
outstanding shares as per 31 March 2001.
Stockholm, 24 April 2001
Anders Ullberg
The Half-Year Report will be
published on 23 July
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The following files are available for download:
http://www.bit.se/bitonline/2001/04/24/20010424BIT00660/bit0002.doc The full report
http://www.bit.se/bitonline/2001/04/24/20010424BIT00660/bit0002.pdf The full report

About Us

SSAB is a Nordic and US-based steel company. SSAB offers value added products and servicesdeveloped in close cooperation with its customers to create a stronger, lighter and more sustainableworld. SSAB has employees in over 50 countries. SSAB has production facilities in Sweden, Finlandand the US. SSAB is listed on the Nasdaq OMX Nordic Exchange in Stockholm and has asecondary listing on the Nasdaq OMX in Helsinki. www.ssab.com